Jennings and Another v Bank of Scotland

• Jurisdiction: Ireland
• Judge: Mr. Brian J, McGovern
• Judgment Date: 05 December 2012
• Neutral Citation: [2012] IEHC 515
• Court: High Court
• Date: 05 December 2012

[2012] IEHC 515

THE HIGH COURT

[No. 408 COS/2012]

Jennings v Bank of Scotland PLC & Ors

No Redaction Needed

IN THE MATTER OF DIORAMA LIMITED AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2009

BETWEEN

PATRICK JENNINGS AND MARY JENNINGS

APPLICANTS

AND

BANK OF SCOTLAND PLC, KIERAN WALLACE AND BARRY DONOHUE

RESPONDENTS

COMPANIES ACT 1963 S316

LAND & CONVEYANCING LAW REFORM ACT 2009 S64(2)(B)(iv)

R (MERCURY TAX GROUP LTD) v HM REVENUE & CUSTOMS CMRS & ORS 2009 STC 743 2008 AER (D) 129 (NOV) 2008 EWHC 2721 (ADMIN)

WINDSOR REFRIGERATOR CO LTD & ANOR v BRANCH NOMINEES LTD & ORS 1961 CH 375 1961 2 WLR 196 1961 1 AER 277

Company - Insolvency - Receivers - Directors and shareholders claiming that receivers not validly appointed

Facts: The second and third respondents had been appointed joint receivers and managers over the assets of Diorama Ltd in respect of sums outstanding to the first respondent. The applicants, both directors and shareholders in the company, now claimed the second and third respondents had not been validly appointed, and sought an order to that effect

Held by McGovern J, that the history of correspondence between the parties clearly demonstrated that the applicants were fully aware of the sums owed to the first respondent, and as such the appointment of the receivers was prima facie valid. In respect of a suggestion that sums held in accounts belonging to other companies were wrongly set off against the outstanding debt, this was clearly permitted by the terms and conditions of the loans.

In respect of the deeds of the appointments, the applicants contended that the nature in which the documents were signed rendered the appointments invalid according to earlier case law. However, McGovern J was satisfied the case in question could be distinguished from the present, as in the instant case the documents signed were intended only to confirm acceptance of appointment. Formal confirmation later followed. As such, the Court held the appointments were valid. R (Mercury Tax Group and Another) v Revenue and Customs Commissioners and Others [2009] STC 743 distinguished.

1 JUDGMENT of Mr. Brian J, McGovern delivered on the 5th day of December 2012

2 1. This is an application brought by the applicants for an order pursuant to the provisions of s. 316 of the Companies Act 1963, declaring that Mr. Kieran Wallace and Mr. Barry Donohue ("the Receivers") do not stand validly appointed as joint receivers and managers over the assets and undertaking of Diorama Limited. The motion was heard on affidavit and a number of deponents were also cross-examined on their affidavits by leave of the court.

3 2. The applicants claim that the appointment of the Receivers is invalid on two grounds, namely:-

4 (a) Diorama Limited ("the Company") was not in arrears at the time of their appointment, or, if it was, it was due to the wrongful actions of Bank of Scotland plc. ("the Bank"); and

5 (b) the appointment of the Receivers was defective and is therefore invalid.

6 3. The applicants are directors and shareholders of the Company. They are also directors and shareholders of Harlequin Hotels Limited and Harlequin Developments Limited. As directors or shareholders of the Company, the applicants are entitled to bring this application under section 316. Counsel for the applicants informed the court that the objection to the validity of the Receivers' appointment is a technical one.

7 4. I am quite satisfied on the evidence that the Company was in arrears at the time of appointment of the Receivers. On 16 ^th December, 2010, the Company's arrears on three loans (101, 106 and 107) amounted to €883,436.47. No instalment was paid by the Company under the terms of the loan agreements between December 2010 and May 2012. A large volume of correspondence from the Bank to the Company between 24 ^th February, 2009, and 10 ^th January, 2012, was exhibited. This correspondence clearly shows that the Company's attention was regularly drawn to the fact that there were arrears on the Loan Accounts 101, 106 and 107, and that they were not being dealt with by the Company. In the circumstances, the Bank was prima facie entitled to appoint receivers under the terms of a Debenture dated 15 ^th December, 2005.

8 5. The court heard evidence as to the manner in which monies were taken from the accounts of Harlequin Developments Ltd. and Harlequin Hotels Ltd. to be set off against the loans of the Company under Loan 107. Although the applicants complain that this was not permissible, I am quite satisfied, on the evidence, that the Bank was entitled to do so on the basis of...